Marin County Dumping SAP. Still Suing Deloitte. Stay Tuned.

Back in June when the case was first filed, Michael Krigsman, columnist for ZDNet, called Marin County’s suit against Deloitte a “game changer,” one “that has the potential to reshape important aspects of the systems integration business…The lawsuit alleges that Deloitte committed fraud and “misrepresented its skills and experience.” ”

But the world has changed and I did hint at that. Post-financial crisis, in the midst of both private and public financial failures, there’s a very large appetite, more than ever before, to point fingers at someone, anyone. In the Marin County case the squandered dollars belong to seriously beleaguered California taxpayers. The lawsuit is a “Hail Mary pass”.

Who dares to call a spade a spade and accuse a Big 4 of fraud for the “bait and switch” of putting junior folks on a big SAP engagement when you promised experienced ones?

Municipalities hungry for cash, that’s who.

And then I gave the lawyers somewhere to look for bad faith on the part of Deloitte:

Maybe the plaintiff’s lawyers for Marin County should take a closer look at the billing. What you said you’d do and what you did always shows up in the timesheets and the billing. And when it doesn’t or when it’s fudged, especially in a public sector case, it’s a really ugly problem.

Marin County has now decided to rip out, “the County’s SAP system, since it is not completely functional and has not been implemented in all areas originally planned.”

Krigsman asked me for my thoughts as he was writing an update to his earlier column. I read the Assessment of Marin County Software report prepared by their Information Systems and Technology department.

I had a few thoughts to share:

“Even though the study says it a number of times, I think they’re ignoring in their conclusion and their cost estimates the cost of “implementation fatigue.” They’ve got significantly less staff and want to implement software that is supposedly much richer functionally. (SAP has extensive government functionality. Not sure why they are making such a huge distinction between the alternative packages and SAP.)

Even an industry team that has all the resources you need will get tired after 3, 4, 5 years of constant project work. I remember the government projects in my early years at KPMG Consulting. Every time we thought we were getting near the finish line, something would cause a delay or a rework – typically client driven – and we would be put back six months. New versions show up, of course, when a project goes on for years. If you don’t get in and out in a reasonable amount of time, you end up chasing your tail.

SAP now has more functionality than they did when Marin County bought it – inevitable – and no one at the County really wants to start over. Why is cost, an imprecise estimate at his point if it can ever be a precise estimate – the driving force?

If this was my problem, I’d hire a swat team to prioritize the most critical functionality and pay them to blitz 80% of the fixes in six months.”

Krigsman was looking for more insight so I put him in touch with Mark O’Connor, CEO of Monadnock Research, “the consulting client’s most trusted source of objective research and advice on the global consulting and advisory services industry, and on best practices for maximizing value from consulting engagements and from strategic firm relationships.”

You know, I’m having a hard time blaming Deloitte too much for this debacle.

I didn’t go to ZDNet, but I’ve seen a few SAP implementations in my time. And I’ve never, ever, seen one get completed on-time or on-budget.

There are a number of factors that contribute to the problem, some of which include ill-defined and/or changing user requirements, user personnel not being made available as promised, and business rules that are rooted in inefficient legacy practices.

The Big 4 practice of throwing warm bodies at a major project instead of selecting the best and brightest would be another factor (if that’s in fact what Deloittee did). Using partners who needed revenue (as opposed to partners who actually understood an SAP implementation) could be another factor. I wouldn’t be surprised to learn that Deloitte had its share of management problems.

But I also would be shocked if the entire debacle could be laid at Deloitte’s feet without any share of the blame going to the client.

Because both sides likely have some issues here, I see this suit settling soon.

Truman, with all due respect, I suggest digging just a tad deeper. The ZDNet post (which I wrote) is clear that Marin must take a good deal of the responsibility. However, it is also true that Deloitte’s actions appeared to substantially contribute to the situation. In fact, I definitely suggest taking time to match the Deloitte contract against the outcomes in this case. It’s not a pretty picture.

So, where do I sign up to testify against Deloitte? Deloitte hires kids straight out of college and pays them around 60K per year and convinces clients to pay $200/hour or so for these kids. How else would Deloitte do this w/o “inflating” the experience of its team? It should not be a hard thing to prove, and there should be plenty of people who are willing and able to testify to this fact. Yet, it never comes to light, because Deloitte somehow pays for it to go away and continues its scheme. Is there any other industry in the United States that continually gets away with selling defective products? Didn’t Tylenol recall its medicine, GM its cars, etc. The public accounting firm darlings, however, are never held accountable. Just look at all the failed audits and the state of the U.S. economy now.

All due respect back at you. That said, I’m not clear what your point is. I just finished a quick read of your well-written post at ZDNet and I didn’t see a link to the Deloitte contract. I did see that you correctly noted that Deloitte focused on the implementation without taking responsibility for the ultimate outcome, and that Marin County wanted to hold Deloitte responsible for more than the implementation. I must have missed what set that agreement apart from the rest of ‘em. Apologies for my lack of perspicaciousness.

I’m not a defender of the Big 4. Just check out my other posts on this site and you’ll get a sense of where I’m coming from. But in this case I have to wonder why anybody would think Deloitte would accept responsibility for something it couldn’t control. It would normally not be considered to be an expert in how Marin governs itself, in the business rules that define how Marin conducts the business of government. It would not have control over Marin personnel or whether they would have time or competency to work with the implementation team to design a system that did what it was supposed to do. All Deloitte could control was putting the right people with the right skills in place to work with Marin personnel to design a system and implement a system that executed the design.

Again, I didn’t see a link to the Deloitte contract. It is possible that it says something that would contradict my points above. If so, I would be surprised, because when I was in the Big 4, we went to fanatical lengths to protect the firm by way of the contract language. Any hint of over-promising was rigorously deleted from the final version. Any hint of guarantees of outcome was similarly trashed. We promised the minimum, in vague language. And then tried to bill the maximum. If you accuse Deloitte of that transgression, you must similarly point a finger at many other firms.

I wasn’t there; I don’t know. But I know my experience. I’ve seen a few SAP implementations in my time. None ever delivered the promised functionality on schedule or on budget. None.

it will come down to the wording of the engagement letter. i have seen enough of them to know that the county assumed most of the risk and that deloitte (and all othet consultants) do a great job of having incredible protections and indemnity. all the county can really do is attempt to bad mouth deloitte enough to attain some sort of settlement. thought something similiar happened in los angeles county a few years ago concerning a payroll system. with respect to the moron who left the incoherent message on sept 10th, i would simply state that no one has to hire deloitte or anyone else. and, umm, sure, failed audits created the economic crisis and it had nothing to do with the economic policy of our gov’t.

Ned, you must be part of the Toilet team. It is obvious from your post. No one has to hire Toilet. However, when Toilet presents itself as a Mercedes, Neiman Marcus, etc., but is really a Pinto, K-Mart (get the point, moron?) and tricks people into hiring them, it is Toilet’s fault. So, do everyone a favor and just flush yourself down the drain. Hope your raise at Toilet this year was worth all the effort. : )

Everyone pay no attention to Ned…he’s probably some insecure partner who would do almost anything to protect his unit values. I’m willing to bet Ned is the inept partner who was in charge of the SAP engagement. Well Ned, sorry to hear you gonna have to settle with Marin. Guess you’ll have to hold off on that new Maserati until next year.

[…] Marin County Dumping SAP. Still Suing Deloitte. Stay Tuned. Krigsman was looking for more insight so I put him in touch with Mark O’Connor, CEO of Monadnock Research, “the consulting client’s most trusted source of objective research and advice on the global consulting and advisory services industry, and on best practices for maximizing value from consulting engagements and from strategic firm relationships.” […]

Leave a Reply

Name

Mail (will not be published)

Website

The RSS Feed

Click the link above subscribe to my RSS feed. You can use a free RSS reader such as Google's Reader to receive and read my posts. I can also be found on Twitter @retheauditors.

Subscribe to my feed by email

Search

Browse Archives

About the author

Francine McKenna (@retheauditors) is the Transparency Reporter at MarketWatch.com, a Dow Jones publication, where her work is also featured frequently in the Wall Street Journal. McKenna had more than twenty-five years of experience in consulting and professional services including tenure at two Big 4 firms, both in the US and abroad before becoming a journalist. Look for her prior columns, "Accounting Watchdog" at Forbes.com and "Accountable" at American Banker. For more information, click "About" at the bottom of this page. For more information contact Francine McKenna, fmckenna@mckennapartners.com